The Clock: Why 1,000 Days Decides Everything

Bill Canady: Thousand days. That's enough time to transform a company, but not enough time to waste. Welcome to the One Thousand Day CEO, the podcast about decisive leadership, sustainable growth, and building a business that thrives beyond any one leader. Your host is Bill Kennedy. Let's make every day count. I want to tell you about a conversation I had more times than I can count. This month nineteen, the CEO calls me, it's a good operator, real credentials. He took a seat about a year ago at the company and the sponsor brought him in for a business a little over 300 million dollars. And he says, and I'm quoting him almost to be exact because they all say the same version of this. He says, Bill, I don't understand it. Revenues up eleven percent. We've had a record two months. I just got off the board call where I could feel the temperature change. So I asked him one question. I asked him, What about his Eba Dye? What did it have done over the same period? Well, look, it was There's a long pause and he goes, Well, it's about flat. Well, there it is. That's the whole conversation. Revenue up eleven, eba dot flat. And the board has stopped asking how it's going and started asking what the plan is. Two calls later, he's got a co pilot he didn't ask for. Two quarters later, someone else has his office. Now he didn't fail. He worked harder than anyone in that building. He just spent nineteen months making the business bigger without making it better. And by the time the scoreboard told him, the clock had already taken most of what he had left. Now that's not a story about a bad CEO. This is a story about a man who didn't know the game he was playing. So let me start with the proof. Roughly 70 CEOs running private equity backed companies get replaced during the hold. And they're not fired for calls, they're replaced. They don't happen evenly across five or six years. They bunch up hard between months 18 and months 24 typically. Now, sometimes you get What I call ⁓ infant sudden death, right? They come in within about 90 days, so it just doesn't work out. The team rejects them. But typically they get about a year and it's not working out. The board starts working on it. It's a very specific window, and something happens in that window and it's happening on purpose and it's knowable in advance. Here's the other number, and this one is the reason the first one is getting worse. A deal underwritten today generally needs the business to grow even between ten and twelve percent a year. To return what the sponsor promised. Now go back a decade or so, and that period was closer to five. 12's a new five. You know, they say, you know, 50 is a new 40. Well, 12's a new five here. It's the same operators, same companies, more than double the required slope. And multiple expansion isn't showing up to bail anyone out anymore. Ever since interest rates have gone up so much, the multiple expansion can't be counted on to be automatic. It has to come out of the operation and it has to come out of you. Now here's my promise. By the end of the next half hour, you'll be able to look at your own hold period, whatever day of it you're standing right now, and tell me exactly which phase you're in, what that phase is supposed to produce, and whether you're on pace or behind. Not a feeling, it's a location. You will know where you are on the clock. And here's the plan. Four phases, a thousand days, cut into four pieces, each one with a deliverable and a deadline. I'll walk you through all four. tell you what each one is actually for, and tell you the specific ways operators lose each one. By the end, you'll have a diagnosis of your own business and you can run this weekend on the back of a nav. This is a thousand day CEO. I'm Bill Kennedy and let's get into it. Let's start with the number in the title because it's not marketing, it's arithmetic. When a sponsor buys a company, they tend to buy it with the exit already in mind. The model has a date on Call it five years, sometimes six. Holes have stretched. There's no doubt about it. They're the longest they've been in 25 years. But the part of that hold where you can actually change the outcome is not five years. It's the front end of it, roughly about a thousand days. Because by that time, you're inside the last stretch. You're not building value anymore. You're presenting it. The diligence is running. The numbers you're going to be sold on are the numbers you've already made. Thousand days. Two years, nine months, near enough. We like to say it's three years, ⁓ but thousand days sounds pretty cool. So we tend to stick with that. ⁓ and when companies, when sponsors are putting together the actual company, they're looking at a three-year hold period. The reality is the old periods today are over seven years. But when they're doing the math, sooner's better, right? So that's your window to take a business someone has already paid a full price for and make it worth a premium. Now here's what almost no one tells you when you take the seat. Those thousand days are not one long stretch of running the company. They are four completely different jobs done in sequence. And the skills that you win, the first one will actively lose you the third one. Now that's the trap. That's the whole trap. And I want you to hear it clearly because it explains almost every replacement I've ever watched. The CEO that gets hired into a PE back CEO is usually hired for one specific quality. They're clothing, they're decisive, they're commercial. They know how to get revenue. So they arrive on day one and they're doing the thing they're good at. They go get your revenue. And it works for a while. It really works. Quarters three and four look great. Revenue's climbing. The board is pleased. And underneath it, quietly, the business is getting more complicated every week. More customers, more SKUs, more one-off pricing, more exceptions, more configuration, more small orders from some accounts, from these tiny little accounts that somebody in operation. Is now spending a Tuesday afternoon expediting. Now none of that shows up a line on your PL. There is no expense category called too much stuff. So it hides. It hides in capacity, it hides in cycle time, it hides in the 14% discount somebody gave a customer in 2019 that no one's ever revisited. We've all seen those. It's like, how did that get here? They kind of get here and they hang out for a while. And then someone around month 15, the growth curves flatten. Somewhere in that period. Because you run out of capacity, not out of demand. The margin curve, which has been drifting down the whole time, finally crosses in front of the revenue curve where everybody can see it. That's the month nineteen fun phone call. Every time. And I want to be fair to that CEO because I was that CEO. Early in my career, I ran a business where I could show you revenue chart that would make you want to invest. And a margin chart I would have preferred you didn't ask about. I thought the second chart was an accounting problem. It was not an accounting problem. It was a design problem. And I designed it myself. One accommodating yes at a time. Here's the piece I want you to sit on for a second, because it's the difference between this being a story about luck and this being a story about work. There's a line I used to constantly that I use constantly and I'll use it this say this season. Luck is the residue of design. Branch Ricky said about baseball, it's truer about operating companies than it ever was about baseball. Every CEO I've watched deliver premium X, it will, if you buy them a drink, tell you that they got lucky. The market turned, competitors stumbled, a strategic buyer showed up with a reason to overpay. And that's all true, but it's not the explanation. The explanation is that when the luck arrived, when the business was in condition to catch it, clean segments, real margin, a team that could run without the CEO in the room, that's not luck. That's residual. Somebody designed that on purpose. On a schedule starting on day one. And the CEOs got replaced. A lot of them will tell you they got unluck. Also true. Also, not the explanation. The luck came for both of them. Only one was built to hold it. A thousand days of the design. Let me give you the four phases. Their first day one to a hundred. Then you go through the rest of the year, day 101 to 365. So that closes out your first year. Now you got days three sixty-six to seven hundred and thirty. Day 731 to 1,000, that's the end game. That's when all the work you've done, particularly at the beginning, starting to show free. Each one has exactly one job, each one of these areas, and exactly one deliverable. And if you don't finish the deliverable, you don't get to start the next phase. You just carry the debt forward and pay for it later at a much worse rate. Now, phase one, day one to a hundred. This is where we get command and control. The job is command, not strategy, command. The deliverable is that by day 100, every person in that building can tell you the goal, the strategy, and who owns what. Not approximately, verbatim. Here's the mistake, and it's an understandable one. A thoughtful new CEO arrives and says correctly, I don't know enough yet. I'm going to spend 90 days listening. And they do. And they do a listening tour. They visit every plant, have 121 on ones. It's genuinely good leadership behavior. It's the exactly the wrong thing to do with the only clean pass you're ever going to get. Because here's what a good listening tour communicates, whatever you intend. Nothing has changed yet. And the organization is watching very carefully for whether something has changed because until they see it, every single person is running the old playbook while telling you in the one-on-ones that they're excited about the new direction. You get one clean pass at establishing command. One. And on day 101, you are no longer the new CEO. You're just the CEO. And everything you didn't change in the first hundred days is now something you're endorsing. You own it. So phase one is four meetings. And I'm going to spend the next entire episode on the first one because it's the one people get wrong worse. Get the goal, set the strategy, reorganize the company, take action. It's four meetings, 100 days. And at the end of the organization notes, a new era has started. Now, the failure mode for phase one is a laundry list. 25 initiatives. I've seen the deck. It's beautiful. It's comprehensive. Every function is represented so no one's feelings get hurt. And it's functionally identical to having no plan at all. If everything is a priority, your organization will pick its own priorities. And I promise you, they will pick the comfortable ones. Now, phase two, right? We talked about this earlier, days 101 to day 365. So it's the rest of that year. Earn the right to grow. This is when the job changes completely. And this is where the closer starts to struggle. The job in phase two is not growth. The job in phase two is become the kind of business that can grow profitably. And then, only then two growth. The deliverable's margin, EBITDA and cash visibility turn by day 365. So by the end of that first year, you got to be nailing the margin. You got to be on that path. You can't give up all the top line and doing it. So it's not a turnaround, it's turn. You're not planning to do it. You got to get it turned. Here's the principle, and it's the one that names the whole phase. Most CEOs try to grow before they've earned it. And when you grow a business that hasn't earned it, you don't get growth. You get expansion. The business gets bigger and more complicated and less profitable at the same time. You have scaled the dysfunction. I always say a baby doesn't make a bad marriage better. In fact, makes it makes it complex. Now you have more of exactly the thing that was already hurting. Growth without profitability isn't growth. It's acceleration into a wall. And earning the right to grow is not a moral statement. I want to be clear about that because it sounds like one. It sounds like I'm saying you only deserve what you work for. That's not it at all. Just a statement about possibilities. A business below a certain operating threshold will not convert incremental revenue into incremental profit. It will convert it into incremental cost. That's not a value judgment. It's a machine. And you can measure it. There's a ratio. It takes two lines off your PL in about 30 minutes, and it will tell you flatly whether you're on the growth track or the fixed first track. Now that's episode four. And if you only listen to one episode this season, make it that one. Phase two is where the set phase two is where you segment the business and find out where profit actually lives. It's where you find your quad for. The bottom value customers buying bottom value products and discover that 4% of your revenue is eating somewhere between 20 and 40% of your capacity. It's where you fix the price. It's where the fastest lever you will ever touch, it's where you can find this. It's where you rebuild the budget from zero instead of from last year, because last year's plus five percent is how you lock in every bad decision you've ever made. The failure mode for phase two is flinching. You will build the analysis. You will see the tell clearly. And then somebody in the room will say this sentence, but that's still $4 million of revenue. And if you flinch there, the whole phase is decoration. That's 4% isn't the cost. The 4% is the bait. Now we're going to phase three. That's day 366 to day 730. Scale what matters, right? We've earned it. Now let's go get the thing that's really going to work. So now you grow. And now the job changes again. And this is the transition that ends more CEO tenures than any other. Because phase one and phase two, you can do largely on your own force. You can push a hundred days of command through sheer presence. You can push a simplification agenda through by being the most stubborn person in the room. Phase three, you can't do it that way. Phase three is the phase where business has to run without you in the room. And if the only functioning system in that company is your personal attention, You've just hit your ceiling. And the ceiling isn't the market. It's you. The deliverable for phase three is a flywheel by day seven hundred and thirty. Growth that continues when you're on a plane. A leadership team where each person owns a number and presents it themselves. An operating cadence, weekly, monthly, quarterly, that runs whether or not you're feeling energetic that week. That's the team and the cadence. Episode eight and nine. Now the failure mode for phase three is Is the hero CEO, the one he's got it all figured out. They know what they're doing. If you feel like the chief everything officer, it's not because you're a micromanager. Most of the CEOs who feel that way are the opposite of micromanagers. They're carrying the loads because the architecture was never designed to carry it without them. That's a designing problem, not a character flaw, and it's fixable. But it's fixable in phase three, not in phase four, when the buyer's advisor is asking who else can run this. So now we're on phase four. That's day 731 to day 1000. I call that always be exiting. Abe, always be exiting. It's the last phase, and the job is the premium. And here's the thing about the premium I need you to internalize because it changes what you do on a choose. Enterprise value is EBADA times the multiple. Every operator alive understands the first turn. Almost nobody works on the second one on purpose. The multiple here. Is not handed to you by the market. It is substantially a function of how risky your business looks to someone who has to write a check and then live with what they bought. Customer concentration, owner dependency, where the forecast has ever been right, where the management team survives your departure. All of that is inside your control, and all of it is worth its turns. Now that's why the phases are ordered the way they are. Margin and cash moves first because they're the fastest. The multiple re-rates last because it re-rates only once the business is actually de-risked. And de-risking takes two years. You spent building the team and the cadence. You can't sprint it to the last 90 days. If you're not there by the last 90 days, you're just polishing. You can't get there in time. Everybody tries, it never works. Buyers can smell a business that got tidied up for the sale and they price it accordingly. The failure mode for phase four is treating the business like it's your baby. Now I'm gonna be blunt about this one because it costs people real money. It's not your baby. Inside the structure, the company is a product, and a product exists to be sold in the best possible condition at the best possible moment. The operators who make the, who make peace with this early make dramatically more money than the ones who make peace with it in the dattering. So four phases, command by day 100, cash by day 365, the fly will we're rocking it by 730, and the premium by day 1,000. Then you're ready. Now we're on to Act Three, the plan. Now let's make this useful because a framework for you can't act on it is entertainment. And I'd rather you get paid. So three moves. You can run all three this weekend. And the first one takes about four minutes. Move number one, locate yourself on your clock. Where are you in the journey? Get the actual date the deal closed, not the date you started, the date the sponsor closed. Count the dates to the day. Write that number down, then write down which number, which phase you're in. I want to warn you about the reaction because it's almost universal. People are further along than they think. Someone who feels like they're just getting started turns out to be on day three, eight. You need to know where you're at. Now that's not phase one anymore. That means phase one is over and whatever command you establish is the command you have. This is uncomfortable and it's supposed to be. You cannot manage a clock you refuse to read. Now you go to move two. Grade the phase you just finished, every phase before your current one as a deliverable. Go grade it, honestly, alone on paper where nobody's watching and you don't have to defend it. In phase one, it was command. Can you pick three people at random from your building and state the company goal in one sentence? Can they do it? Can you pick those three people without them looking it up? Not the mission statement, the goal. If you're not sure, go find out this week. Walk out into the floor, ask three people. Well, they say back is your actual grade. Phase two, cash. Is EBITA in dollars higher than it was 12 months ago? And can you name two specific decisions that moved it? Revenue doesn't count here. Neither does the market was better. Two decisions. Name them. Phase three, the flywheel. If you were unreachable for 30 days, what breaks? Sit with that one. Write the actual list. That's your phase three work order. And it's usually shorter and more specific than people expect. It's really everything. It's usually four decisions that only you can make. Whatever phase you fail, that's your real work. Not the phase you're in, the phase you skip. This is the single most important idea in this episode. You cannot skip a phase. You can only defer it. And deferred phases get more expensive every quarter. A CEO on day 500 who never established command is not doing phase three work. He's doing phase one work late. Against a team that has already decided how much of him they need to take seriously. Okay, your third move. Pick the one thing and put it on the calendar. One, not five. Take the earliest phase you failed, take it as a deliverable, and convert it into a single day commitment in the next 30 days. Not a project, a date and an outcome. If phase one is what you failed, a leadership meeting on the calendar this month that ends with one written gold and named owners. That's episode two. If phase two is what you failed, the right to grow ratio calculated off your actual PL by the 15th, two lines, 30 minutes, that's episode four. If phase three is what you failed, the 30-day break list and one item off of it permanently assigned, the named human being who is not you by month end. That's all you got to do. Go name someone to do it. Now, one commitment dated, and here's the part that makes it real. Tell somebody, tell your CFO, tell your sponsor, tell your spouse. An undated intention is a wish. And I have never once seen a wish move in income state. Now, what's it look like when it's working and when it's the working, it's boring. That's the tell. The scoreboard is the same, five to ten different numbers every week, the same people presenting their own numbers. Variances get calls as an countermeasure, not objectives, not adjectives. Nobody is surprised in a board meeting ever because bad news travels fast in a company where it's safe to move it. When it's theater, it's exciting. Big kickoff, great deck, new name for the program, lots of energy in the first six weeks. And then the cadence starts to slip. The week gets moved for a customer visit and moved again. Then it's every other week. And by the second quarter, nobody can tell you what the goal is because it changed twice and neither change was announced. Boring is the goal. Boring compound. Exciting is what you do instead of work. All right, last piece of it here. Three things worth keeping from this one. One, you have to have about a thousand days that matters, and there are four different jobs, not one. Command by day 100, cash by day 365, the fly will by day 730, and the premium by day 1000. The skills that win you phase one will lose you phase three if you don't put them back down and pick up different. Second, you can't skip a phase. You can only defer it, and deferred phases get more expensive every single quarter. If you're on day 500 and nobody in your building can state the goal, you don't have a growth problem. You have a phase one problem and you're paying interest on it. Okay, third, 70% of CEOs get replaced and it clusters around month 18th to month 24th. It's not a coincidence and it's not bad luck. That's the moment the second phase bill comes due. And the bill arrives for a year of expansion. They got mistaken for growth. Which brings me back to where I started. Luck is the residual of design. You will get lucky, perhaps, but don't count on it. A competitor is going to stumble, or a strategic buyer is going to show up with a reason to pay too much, or a market is going to turn your way for reasons that have nothing to do with you. That's coming. The only question that matters is whether on the day it arrives, your business is in condition to catch it. Clean segments, real margin, a team that runs without you in the room. That condition doesn't happen in the last 90 days. It happens because somebody started designing it on day one. You got a thousand days. Go figure out which one you're standing on. Okay, next week, we're all getting all the way back to day one. We do our first of the four meetings, get a goal. It's the meeting almost every CEO thinks they've already had, and almost none of them have actually had. I'll tell you about a hundred and fifty million dollar manufacturer. That walked out of the meeting with one goal and two moves and put six million dollars of Eva Doc on the board in nine months. And I'll tell you why that version was 25 initiatives producing nothing at all. If you want to run the diagnostics from today's episode, the clock counts in the three phases grade. It's on the site at the 8020institute.com. It's one page, it's no pitch, no form to fill out. Takes about 30 minutes. Just the questions and a place to write the answers down, which is the part that matters. I'm Bill Kennedy. Go run your numbers. You've been listening to the 1000-day CEO with Bill Kennedy. Follow the show for more decisive leadership, sustainable growth, and strategies that build enduring businesses. Until next time, make everyday count.